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December 21, 2018

How The FED Could Bring the Economy Crashing


With tightly clenched fists, market pundits, analyst and investors eagerly awaited on Wed. the news from Jerome Powell, the current FED Chairman.  

What had the markets once again on edge is whether or not the FED would continue down its path towards calamity, going against the market’s wishes and short-term interests by raising rates. 
Throughout the course of 2018, I wrote a series of articles highlighting how the FED could and perhaps even may want to bring the economy crashing to a halt. 
The reasons for this are many, but the most obvious is their opposition to President Trump, who has made it crystal clear through his constant sparring with them that he is not a fan of the Federal Reserve. 
Trump, much to the dismay of many of his supporters, has tied himself with an anchor to the movements of the markets. 
This has worked out fabulously for him as new all-time highs were achieved. But as we have seen, it doesn’t work so well with the recent gyrations the market is experiencing. 
The "hawkish" approach adopted by the FED recently has confused those who are unable to see what is happening, and angered others who wish they would simply leave the market to its own devices, unhindered by their meddling. 
Unfortunately for the latter, more anger is on the way. The FED has increased rates and will likely continue to do so further, bringing the markets down in the process as we head into the campaign cycle for the upcoming 2020 elections. 
This raise in rates comes in spite of a 3,000 point plunge in the DOW from its highs—a drop that I accurately predicted, once they began their recent rate increases. 
In addition to this, major corporations have stated that they see numerous indicators that reflect a slowing global economy. 
Geopolitical tensions are also running at all-time highs, as France continues to be wracked by the "yellow vest" protests , which have nearly brought the country to its knees. 
Meanwhile, the recent trade wars between the United States and China has taken a heavy toll on both sides, with the latter experiencing a significant slowing of growth. 
In spite of all these bearish indicators, I believe the FED will STILL continue to raise rates, leaving many top economists simply shaking their heads in confusion. 
Economist Stephen Moore had the following to say in a recent Fox Business interview; 
“The Fed has been way too tight. They made a major blunder three months ago with raising the rates. It’s caused a deflation in commodity prices. And I will say this… if the Fed raises interest rates tomorrow they should all be fired for economic malpractice.” 
In regards to firing the FED: if only it was that easy. 
I, for one, stand with Ron Paul and would love to see the FED utterly abolished, as it is a corrupt organization that has done nothing to assist the economy since its sinister creation back in 1913 on Jekyll Island . 
Meanwhile, legendary investor Peter Schiff predicted accurately that the FED will likely raise rates. However, he believes they will take a different approach moving forward, rapidly decreasing rates over the course of 2019, as a new round of Quantitative Easing begins: 
"The Fed will announce another rate hike tomorrow most likely," Schiff says.

"I think that if the Fed hikes rates, there is a very high probability that it’s the last hike in the cycle. That should remove a headwind from gold." 

Regardless of who is right in this scenario, one thing is clear: Turbulent times are in store for the markets moving forward, as we head into an increasingly uncertain and erratic future where the risks of a massive economic downturn are a real possibility... 
Courtesy of Nathan McDonald via Sprott Money
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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